State Retirement and Pension System - Administrative Fees - Repeal
Summary
SB 862 repeals the long-standing requirement that participating employers in the State Retirement and Pension System pay a separate administrative fee for the system’s administrative and operational costs. Instead, beginning with fiscal 2027, those costs must be built into the employer contribution rates certified each year by the Board of Trustees, based on the actuary’s recommendation. The bill also requires the Board to certify employer contribution rates annually and clarifies that those rates must include the administrative and operational expenses of the Board of Trustees and the State Retirement Agency, but not the Investment Division’s expenses.
The bill makes related changes to how retirement system expenses are funded and accounted for. It amends provisions governing the accumulation fund and expense fund, removes the repealed administrative-fee section, and directs that certain operating expenses for the State Retirement Agency be paid through the accumulation fund. It also includes a transition rule for fiscal 2025 and fiscal 2026: local employers must still pay the amounts already certified for fiscal 2025, and for fiscal 2026 the administrative and operational expenses are to be paid from the accumulation fund on a pro rata basis before being folded into employer contribution rates in fiscal 2027 and beyond.
Impact
SB 862 changes Maryland’s State Personnel and Pensions law by eliminating § 21-316, which had required separate administrative-fee payments from local employers and the State to fund retirement system administration. The bill shifts those costs into the actuarially certified employer contribution rates under § 21-125 and related funding provisions, while preserving separate treatment for investment management and Investment Division expenses. It also updates the funding flow between the accumulation fund and expense fund, and requires the Board of Trustees to certify contribution rates that reflect administrative and operational costs going forward.
Sentiment
The bill appears to have been broadly supported and noncontroversial. It passed the Senate 47-0 and the House 136-0, indicating unanimous approval in both chambers. No committee transcript excerpts were provided, but the voting record suggests consensus around simplifying the funding mechanism for retirement system administrative costs and integrating those costs into the normal contribution-rate process.
Contention
There is little evidence of substantive opposition in the available record. The main policy change is a shift in who pays and how costs are collected: local employers no longer make a separate administrative-fee payment after the transition period, and instead those costs are embedded in employer contribution rates. Any potential concern would likely center on the fiscal impact of moving administrative costs into contribution rates, the short transition period for fiscal 2025-2026, and the exclusion of Investment Division expenses from the new funding approach, but no recorded objections or competing positions appear in the provided materials.